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Lawson's Plan For Self-Sufficency

Published: November 12, 2019 11:45 am ET

Last Comment: November 13, 2019 7:48 am ET | 1 Comment(s) | Jump to Comments

Jim Lawson sees an opportunity for Ontario's horse racing industry to eliminate the need for government support, and he's hopeful that plan will come to fruition in the not-to-distant future.

Trot Insider recently discussed a number of racing topics with the CEO of Woodbine Entertainment, including the recent success of 2019 Breeders Crown series at Woodbine Mohawk Park and the current pilot project that has moved the 10 horse to a trailing post and added 1-3/8 mile races with 11 starters at Mohawk for the next two months.

The third part of Lawson's interview appears in a Q & A format below. Trot Insider will present the subsequent interview topics in the upcoming days.

SC: You spoke to the odds and the effect of those large wagers and how they can fluctuate the odds...referencing some of your other comments on fixed-odds wagering, is there potential for fixed-odds wagering in Canada without single-game sports betting?

"That's a great question. I'd like to think there is but we just don't seem to be able to get the attention of the regulators and the authorities to make the changes to allow it. Horse racing is only licensed to do pari-mutuel wagering; fixed-odds wagering would require an amendment to our license and I think there's an argument, again given the experience Australia is easily the best example, that is can really help horse racing for all the reasons we've talked about. If someone comes in and takes a chance on a horse -- it's less profitable for the racetrack, we understand that -- but if someone comes in and sees a horse...there was a really good Breeders Crown example [Winndevie] of a horse that was 5/1 and went off as the favourite. If someone could have grabbed the horse at 5/1 you would have seen a whole lot of wagering on fixed odds...people bet early on at 4/1 and 9/2 and then say 'oh my god, now she's the even money favourite!' People outside of our sport just do not understand that, and it's hard to get your football wagerer or your other wagerer into harness racing. Even if you're doing a great job at marketing it's hard to get them to understand that. And so, they don't like it. And with small pools, the impact is dramatic. So it could be done, there's no reason we couldn't do it. We'd need to get a lot of expertise in to make sure we don't get burned by offering fixed odds but it certainly has helped in other jurisdictions in the world.

"If sports betting comes, then you will see fixed odds wagering on horse racing. It only makes sense that they go hand-in-hand, but to answer your question, which is a very astute question, I don't see any reason. We've pushed and we've asked but it just doesn't get any momentum of why we can't offer fixed odds wagering on horse racing today in advance of single-event sports wagering.

"I mean, the only arguments against single-event sports wagering go to responsible gaming...that argument against it starts to lose its validity when you say 'people are already betting horse racing, why don't you offer fixed odds on those horses?' We'll continue to try and the good thing is, much like trying other distances and doing other things, we can point to other jurisdictions and say 'look how successful fixed odds has been in Australia or Singapore or Hong Kong or the U.K.' It's everywhere in the world, but somehow it's hard for horse racing to get the attention of the appropriate people in Ottawa."

SC: Does a minority government make this a harder sell, or does that impact the progress or process at all in your opinion?

"To be determined. You're probably aware Sandra Pupatello in Windsor, who lost the election as a Liberal, was going to come forward with a bill to support single-event sports wagering. I'm not sure it makes any difference whether it's a majority or a minority. I think the one thing that we are seeing is that -- and I don't say this with any particular expertise -- we continue to see pressure in this country on the public books, and the amount of debt and spending. I mean, we as Canadians cherish and appreciate our health care system and the quality of our infrastructure and roads and our education system...we're very fortunate to live in Canada. But it comes at a cost, and the cost is additional income taxes and additional property taxes and I think people are tired of additional incomes taxes and additional property taxes.

"So the one thing I think this has going for it is it's such an obvious revenue source. We're talking a $10-15 billion market, the majority -- certainly more than 50 percent -- would go into government coffers to help health care, to help education and to help infrastructure costs. I think this government, at this time, needs to look at additional revenue sources and as I've been, again, beating the drum about, Woodbine Entertainment is in a position where it has the infrastructure today, it has the expertise, we're Canadian so it's a Made-In-Canada solution, and we're effectively a non-profit mandate so in Ontario if we were to participate to some extent we could eliminate any horse racing subsidy, which would be good for the current Ford Government, and the greater amount we participate we could also agree and designate monies for health care and education and other social causes including youth sports. No one else has the ability to do that. We run the most robust and the only legal single-event sports wagering in the country today, which happens to be on horse racing. We're so well-positioned, they can't ignore us...especially if single-event sports wagering comes in and we don't participate it will cannibalize the industry and put at risk many of the 40 or 50,000 jobs across the country that are employed in the horse racing industry. We check the box.

"I sat down with OLG three or four weeks ago now and said 'here's why we need to participate. A) we can do it better than anyone and I challenge you to think of another entity in Canada that can do it as well as we can, and our evidence is our HPI network that runs across the country, that's very robust, modernized, innovative, technologically-sound. We're heavily regulated today so we know we meet the standards of the regulator, we're Canadian -- why would you put money into foreign people's pockets when you can keep the money in Canada, we're a non-profit mandate so we will agree to eliminate the horse racing subsidy and being a non-profit we will also support health, education, social causes and youth sports.' Man oh man, if that doesn't do it for you, who else are you going to get?  

"I think we're starting to gain credibility that if single-event sports wagering comes into this country and this province, we need to play a role. It will be a huge mistake if we don't play a role because more money will go back to the taxpayer and we'll save a lot of jobs and the money will stay in Canada and it won't go into someone's private pockets."

SC: It seems like the same sort of argument from some 25 years ago when expanded gaming came to Ontario, and the potential effect on the province's horse racing industry. A partnership was developed and we all know how it went from there.

"I started as Chairman of Woodbine in 2012 which is exactly, much to my chagrin, when they introduced the cancellation of the slots program. And I argued and argued until I was blue in the face that we should operate the gaming at Mohawk [Racetrack] at a minimum, for all the same reasons that I just said. If we operate, we're going to do it just as well, the employees are already there, the equipment was there, all we had to do was probably hire a senior manager of gaming and a marketing person for gaming. And all that money that's now going into private shareholders' pockets would come to the racing industry and the government would not be paying subsidies today because the profits at Mohawk would have supported the industry. And I argued and argued, and I still feel I was right. It's very frustrating to me that, at a minimum, we weren't selected or picked to run the gaming at Mohawk. It would have solved a whole lot of problems for government today and this industry if Woodbine Entertainment was operating the slots and casino now at Mohawk for the benefit of the entire Ontario horse racing industry.

SC: If the numbers would have supported essentially taking the transfer payment away then I'm not sure what the government would have to argue about that.

"It would have done so then, and if sports betting comes and they let us participate -- I keep using the word 'participate' because I don't think we're suggesting we should get it all...I think there's going to be a role for the retail stores and I think there will be a role for some of the casinos but in terms of potentially participating in the internet product and combining our network with the OLG network in terms of back office and the really obvious one is the Champions lounges across the province, all of which could be turned into sportsbooks. If we can participate in that way we could eliminate the whole funding agreement from the province, because we're talking about ultimately if Woodbine Racetrack gaming grows and other things grow we won't need the government subsidy in four or five years. So we're talking about the balance of the horse racing industry, which probably means we're talking about $35 million. And $35 million is a drop in the bucket to the amount of money that could be earned in participating in single-event sports wagering in the province. The market, I used the number $10-15 billion across Canada, I think the number in Ontario is probably $8-10 billion of that. Depending on the tax rate, you're probably talking about $6 billion to the government and you're also talking -- after operating costs -- a couple billion split two or three ways, and that's why it's a drop in the bucket to find $35, 45, 50 million.

"Right now the horse racing industry doesn't have any growth in it. That funding agreement, it's a fixed amount for the next 17 years. There's no growth, so the pressure is to try and grow wagering but, as you've seen me describe, once you understand the margins and the pari-mutuel model that we're dealt with, especially on the growth that I'm talking about which is mostly in foreign jurisdictions, the margins are so thin that our net profit on the wagering increases outside of Canada is barely staying ahead of the rate of inflation.

"So there is no growth, and I have a lot of sympathy for the horsemen...drivers, owners, trainers...I have a lot of sympathy for them that their costs keep going up and we're not keeping up. And wagering, because of all the casino gambling and illegal sports wagering, we're not keeping up. And somehow we need to find a way, if and when sports wagering comes to participate, to right-size this and put some growth back into horse racing so these people can afford to live. I don't think the government understands that these people are just living, they're hand-to-mouth a lot of these people and it's hard to make a living in the horse racing industry. I get it because I see it everyday, but government doesn't quite understand that's the case."

SC: To your point, which you also said, if Woodbine isn't at the table with single-game sports wagering should it be rolled out on a national level, horse racing's effectively done.

"Yeah, it will really, really damage us. Very little horse racing will survive and people just won't wager on us anymore."

SC: And I think that's a national issue, not simply an Ontario issue. I would think its effect on other jurisdictions would be even more deleterious to a degree.

"Absolutely. It's a national industry, and I've been asked a couple of times -- I think Dave Briggs interviewed me recently -- about a commissioner and I said 'well, it's tough to think about a commissioner in such a heavily regulated industry but I'll tell you what it won't do, if we don't rally every racetrack and every breeder and every owner around issues -- marketing issues, gambling issues, sports betting issues --  that's where we could really make some gains.' Because right now this is not a unified industry, and it's not bad in Canada but when you look at the problems in the United States on all of the issues they have because -- on the Thoroughbred side -- there's at least 37 different horse racing jurisdictions and no one can agree on anything. So how do you get unified on some of these things? They fight and argue over everything, and I think we need to come together as an industry. My 'Stronger Together' pitch about Ontario, as you correctly point out, that applies across the country when it comes to issues like sports wagering and the cannibalization of horse racing across the entire country.

SC: You spoke to the mandate of Woodbine as a non-profit that puts everything back in, and I'm not saying this is something you would want to do but who sets the mandate and can that change?

"The mandate, we have a letters patent that years ago really effectively said your sole mandate and authorization is to support horse racing in Canada. And at one point, I'll say 20 years ago, Woodbine looked at trying to go private. Not sure they would have been successful in doing so, and created what I would describe as a public offering to having shareholders. I don't think that's in anyone's mindset today, certainly not mine and I can say honestly that topic hasn't come up at the Board...I've been Chairman since 2012 and I can tell you it's never come up. All the real estate that we have and all the real estate we're doing, we're doing it with one focus and one focus only and that's trying to generate cash flow in the future to support horse racing. We have enormous capital plans both at Woodbine and at Mohawk and we have somewhere close to $100 million in capital costs, capital maintenance and capital expenses each year. And we have a big machine to feed at those two race plants. So we're doing all this real estate development for one reason and one reason only and that's to have horse racing survive and the same can be said for our interest in being involved in, as we've talked about at length, in sports betting. We just want to support this industry.

"I don't think it will change. I don't think anyone wants it to change, and I don't even think it can change. I think the regulator, we have a good relationship and good understanding that we have a non-profit mandate and we're trying to generate cash and we're very heavily regulated in terms of what we do and how we spend our money, all with a view to supporting racing. And we have a respectful yet close working relationship with the AGCO, and that's the path that we're on and I don't see that changing...I would say it's cast in stone."

November 13, 2019 - 7:48 amI hope the WEG bashers will

Jack Darling SAID...

I hope the WEG bashers will read this and understand what is going on in our business. Sports betting. fixed odds betting, {instant racing machines within the tracks themselves is on my own personal wish list}and WEG's property development etc are our hopes for the future. We are so lucky that WEG is structured the way it is, to promote and support horse racing. Is WEG perfect? Of course not, none of us are, but they are the ones with the power, expertise and drive to get these things done. We, the beneficiaries of this great sport, should support them and work with them in these endeavors.

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